23. Why are private firms unable to produce public goods?

a. They can produce these goods but the government outlaws private firms from producing them.

b. The marginal cost of production is too high for private production to be possible.

c. They can produce these goods but they would not earn any revenue because of the free-rider problem.

d. None of the above answers is correct.

24. Measured inequality overstates actual inequality because _____, meaning consumption inequality is ____.

a. poverty levels vary across states; greater than income inequality.

b. homeless people are not always counted; a poor indicator of lifetime income.

c. different households are in different stages in the life cycle; a better measure of economic well-being than income inequality.

d. people tend to overstate their incomes; the same as income inequality.

25. Skills are costly to acquire. What forms do these costs take?

a. out-of-pocket expenditures to pay for more education

b. lower wages while learning through on-the-job training

c. forgone earnings while attending higher education

d. All of the above can be costs of acquiring a higher skill level.

26. What causes the welfare trap under traditional welfare arrangements?

a. Low-income people cannot afford to acquire human capital.

b. The break-even income is too high to be reached.

c. There are no jobs available in low-income areas.

d. As earned market income increases, welfare benefits are withdrawn.